Teleflex (TFX)

Medical technology company Teleflex (NYSE:TFX) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 5% year on year to $700.7 million. Its non-GAAP profit of $2.91 per share was 0.9% above analysts’ consensus estimates.

Company Overview

With a portfolio spanning from vascular access catheters to minimally invasive surgical tools, Teleflex (NYSE:TFX) designs, manufactures, and supplies single-use medical devices used in critical care and surgical procedures across hospitals worldwide.

The surgical equipment and consumables industry provides tools, devices, and disposable products essential for surgeries and medical procedures. These companies therefore benefit from relatively consistent demand, driven by the ongoing need for medical interventions, recurring revenue from consumables, and long-term contracts with hospitals and healthcare providers. However, the high costs of R&D and regulatory compliance, coupled with intense competition and pricing pressures from cost-conscious customers, can constrain profitability. Over the next few years, tailwinds include aging populations, which tend to need surgical interventions at higher rates. The increasing integration of AI and robotics into surgical procedures could also create opportunities for differentiation and innovation. However, the industry faces headwinds including potential supply chain vulnerabilities, evolving regulatory requirements, and more widespread efforts to make healthcare less costly.

Teleflex competes with major medical device companies including Becton, Dickinson and Company (NYSE:BDX), Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT), and Baxter International (NYSE:BAX), each offering products that overlap with different segments of Teleflex's diverse medical technology portfolio.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $3.02 billion in revenue over the past 12 months, Teleflex has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Teleflex’s 3% annualized revenue growth over the last five years was tepid. This was below our standards and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Teleflex’s annualized revenue growth of 2.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can better understand the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 2.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Teleflex has properly hedged its foreign currency exposure.

This quarter, Teleflex reported a rather uninspiring 5% year-on-year revenue decline to $700.7 million of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet.

Teleflex has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 14.4%, higher than the broader healthcare sector.

Analyzing the trend in its profitability, Teleflex’s operating margin decreased by 9.4 percentage points over the last five years. This performance was caused by more recent speed bumps as the company’s margin fell by 12.7 percentage points on a two-year basis. We’re disappointed in these results because it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q1, Teleflex’s breakeven margin was in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Teleflex’s unimpressive 3.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q1, Teleflex reported EPS at $2.91, down from $3.21 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Teleflex’s full-year EPS of $13.71 to grow 6.3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Teleflex has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 15.4% over the last five years, quite impressive for a healthcare business.

Taking a step back, we can see that Teleflex’s margin dropped by 2.6 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Teleflex’s free cash flow clocked in at $43.33 million in Q1, equivalent to a 6.2% margin. The company’s cash profitability regressed as it was 3.9 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Teleflex historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.1%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Teleflex’s ROIC decreased by 4.6 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Teleflex reported $284.1 million of cash and $2.00 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $725.7 million of EBITDA over the last 12 months, we view Teleflex’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $37.89 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its full-year EPS guidance missed significantly and its constant currency revenue was in line with Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.8% to $130.32 immediately after reporting.

Updated: May 22, 2025 at 11:52 PM EDT

Before making an investment decision, investors should account for Teleflex’s business fundamentals and valuation in addition to what happened in the latest quarter.

Teleflex isn’t a terrible business, but it doesn’t pass our quality test. To kick things off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its strong operating margins show it’s a well-run business, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its unimpressive EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Teleflex’s P/E ratio based on the next 12 months is 8.3x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $155.82 on the company (compared to the current share price of $122).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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